- FG Agrees Debt Servicing a Challenge
Days after the International Monetary Fund advised President Muhammadu Buhari to raise the tax rate in order to meet Nigeria’s high debt servicing cost, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed agreed that despite the nation not having a debt problem, meeting debt obligations remained a challenge.
The minister made the statement during an interview with journalists at the World Bank/International Monetary Fund meeting in Washington DC, United States.
She said: “underperformance of our revenue is causing a significant strain on our ability to service debt.”
Earlier this week, the Debt Management Office (DMO) said Nigeria’s total debt rose by N1.3 trillion or 5 percent to N25.7 trillion in the first half of the year. Suggesting that debt servicing cost has automatically surged.
While Nigerian experts have called for restraint on debt, the International Monetary Fund had said debt is a necessary evil for growth. However, the fund called for a tax increase to up revenue generation as a means to ease the nation rising debt burden.
In the new 2020 proposed budget, Nigeria appropriated N2.5 trillion or 25 percent of N10.3 trillion of 2020 proposed budget to debt servicing. Another indication of the country’s precarious situation as the available fund for capital projects in a nation of almost 200 million people suffers.
This explains why only N2.14 trillion was allocated to capital projects in spite of the nation’s huge infrastructure deficit.
Despite President Muhammadu Buhari’s claimed of infrastructure development, Nigerians are yet to feel its impact in terms of growth or productivity. Still, they are being saddled with more charges from Value Added Tax to Deposit and Withdrawal fees, even online transactions and betting will attract 5 percent VAT starting from 2020.
Meanwhile, Ahmed justified Nigeria’s current application for another $3 billion from the world bank. According to her, the new loan would be used to finance the struggling power sector.